Correlation Between Discover Financial and National CineMedia
Can any of the company-specific risk be diversified away by investing in both Discover Financial and National CineMedia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Discover Financial and National CineMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discover Financial Services and National CineMedia, you can compare the effects of market volatilities on Discover Financial and National CineMedia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Discover Financial with a short position of National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and National CineMedia.
Diversification Opportunities for Discover Financial and National CineMedia
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Discover and National is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia and Discover Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Discover Financial Services are associated (or correlated) with National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Discover Financial i.e., Discover Financial and National CineMedia go up and down completely randomly.
Pair Corralation between Discover Financial and National CineMedia
Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.58 times more return on investment than National CineMedia. However, Discover Financial is 1.58 times more volatile than National CineMedia. It trades about 0.21 of its potential returns per unit of risk. National CineMedia is currently generating about -0.05 per unit of risk. If you would invest 15,013 in Discover Financial Services on August 30, 2024 and sell it today you would earn a total of 3,243 from holding Discover Financial Services or generate 21.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. National CineMedia
Performance |
| Timeline |
| Discover Financial |
| National CineMedia |
Discover Financial and National CineMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and National CineMedia
The main advantage of trading using opposite Discover Financial and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, National CineMedia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in National CineMedia will offset losses from the drop in National CineMedia's long position.| Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
| National CineMedia vs. Capital Income Builder | National CineMedia vs. Direxion Daily FTSE | National CineMedia vs. Dodge Global Stock | National CineMedia vs. Collegium Pharmaceutical |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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